THE war on Britain’s benefits free-for-all was cranked up yesterday as George Osborne vowed that state handouts for the jobless would not rise at a faster rate than wages.

George Osborne said out-of-work benefits would rise by one per cent for the next three years []

The Chancellor said out-of-work benefits would rise by one per cent for the next three years, compared with 2.2 per cent this year.

Jobseeker’s allowance, employment and support allowance and income support will be cut in real terms under the new measure.

It will slash a further £3.7billion from the colossal welfare bill left by Labour and help boost the UK’s coffers. The change comes on top of £18billion in welfare cuts previously announced.

However, the spiralling welfare bill is still set to rise by around £12billion after Mr Osborne failed to secure a deal to freeze the overall budget.

Announcing his Autumn Statement to MPs the Chancellor insisted it was “fair” that welfare recipients should receive similar increases in income to public-sector workers, who are getting a one per cent rise as a lengthy pay freeze comes to an end.

With pay restraint in businesses and government, average earnings have risen by around 10 per cent since 2007

George Osborne

Ministers are understood to have been eyeing an end to the link with prices since it delivered a bigger-than-planned uprating in April due to higher inflation the previous autumn.

Mr Osborne told MPs: “With pay restraint in businesses and government, average earnings have risen by around 10 per cent since 2007. Out of work benefits have gone up by around 20 per cent.

“That’s not fair to working people who pay the taxes that fund them.”

The new cap means benefit recipients will get “more cash but less than the rate of inflation”, said Mr Osborne.

The changes will be introduced through a Welfare Uprating Bill to be taken through Parliament shortly.

Most working-age benefits will be ­subject to the one per cent cap over the next three years, as well as elements of the child tax credit and working tax credit.

Child benefit will continue to be ­frozen next year, and will then rise by one per cent annually for two years from April 2014.

Mr Osborne also promised to protect the vulnerable by continuing to increase carer benefits and disability benefits in line with inflation.

Recent polls have shown that the public largely support measures to cut benefit payments, with only 28 per cent wanting more spending on welfare.

Labour pointed out not just the unemployed will see their support slashed.

The party said more than 2.5 million low earners will suffer under the cuts because they qualify for working tax credit. More than 3.7 million who claim child tax credit will also get lower payments.

Shadow chancellor Ed Balls said it was not fair to cut jobseeker’s allowance while at the same time giving a tax cut to millionaires.

He said: “He’s not just hitting those looking for work. The majority of people who lose from cuts to tax credits are people in work – millions of families ­striving hard to do the right thing.”